Test pilots who push the envelope either go on to walk on the moon and serve as legislators or die in fiery crashes. Either way, they go out in a big way. Cases that push the envelope don't have such dramatic finishes, but they often clarify the law, and not necessarily in a good way. In Arnold v. Mutual of Omaha Insurance Company (December 30, 2011), the Court of Appeal (First Appellate District, Division One) reviewed the trial court's decision to grant summary judgment in favor of defendant on the claim that a non-exclusive insurance agent was improperly classified as an independent contractor. A key aspect of the Court's decision concerned the issue of whether the trial court applied the correct test for employment to claims alleging failure to reimburse expenses and failure to timely pay wages.

On appeal, the plaintiff argued that the trial court erred in applying the common law test for employment that was enunciated in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). Instead, the plaintiff contended that Labor Code section 2750 supplied a statutory definition of employee that is broader than the common law test and controls the definition of employee applicable to section 2802. I note here, parenthetically, that this argument seems somewhat similar to an discussion of this issue I presented some years ago on this blog. At least now I don't have to wonder how a court would react to this analysis.

In any event, the Court cited approvingly to Estrada for its conclusion that the Labor Code does not define "employee" for purposes of section 2802:

One reviewing court has recently held the Labor Code does not expressly define “employee” for purposes of Labor Code section 2802, and therefore, the common law test of employment applies to that section. (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 10 (Estrada).) That court went on to cite the “principal” and “additional factors” of the common law test as articulated by the Supreme Court in Borello, supra, 48 Cal.3d 341, and summarized above. (Estrada, supra, at p. 10.)

Slip op., at 6-7. While the Court noted that Estrada may not have explicitly considered the argument about section 2750, the Court went on to hold that the common law test must apply, or section 2750 would conflict with the statutes immediately following 2750.

Having settled on the common law test for employment as the correct test, the Court then considered whether the evidence supported the trial court's decision to grant summary judgment. While it is impossible to know what evidence was submitted, the Court's summary of key evidence suggests that the defendant had the better of it:

The salient evidentiary points established Arnold used her own judgment in determining whom she would solicit for applications for Mutual's products, the time, place, and manner in which she would solicit, and the amount of time she spent soliciting for Mutual's products. Her appointment with Mutual was nonexclusive, and she in fact solicited for other insurance companies during her appointment with Mutual. Her assistant general manager at Mutual's Concord office did not evaluate her performance and did not monitor or supervise her work. Training offered by Mutual was voluntary for agents, except as required for compliance with state law. Agents who chose to use the Concord office were required to pay a fee for their workspace and telephone service. Arnold's minimal performance requirement to avoid automatic termination of her appointment was to submit one application for Mutual's products within each 180-day period. Thus, under the principal test for employment under common law principles, Mutual had no significant right to control the manner and means by which Arnold accomplished the results of the services she performed as one of Mutual's soliciting agents.

Slip op., at 9-10.

It's easy to armchair quarterback, but the factual record described by the Court does not seem like the optimal factual record on which to test this issue. Then again, when I appealed Alvarez, I'm sure many people said the same thing... Good thing the Supreme Court bailed me out years after the fact in another case.

The Complex Litigator

The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.